The United States Supreme Court agreed to hear the case of First American Title Corp. v. Edwards. At the heart of the case is a claim that First American violated the anti-kickback provisions of the Real Estate Settlement Procedures Act of 1974 by buying a minority interest in escrow agencies and then establishing an exclusive agency agreement with those agencies to sell First American’s title insurance policies.
At this point, this case is more about a party’s right to sue; the court will not be addressing whether First American did, in fact, violate RESPA. The legal issue is whether Edwards has standing (e.g. has the right to sue) even though she was not overcharged for the settlement services she received. Did she suffer an injury in fact, a prerequisite to standing?
The Ninth Circuit Court of Appeals found constitutional standing because the injury can exist solely by virtue of statutes creating legal rights. In support of that finding, the Ninth Circuit noted that RESPA prohibits the payment of “any fee, kickback, or thing of value” in exchange for business referrals. A person who is charged for a settlement service involved in a violation of RESPA is entitled to three times the amount of any charge paid, not just overcharges. Given this statutory right and the fact that Edwards paid for her services, the Ninth Circuit found standing. The title insurance company, on the other hand, is taking the position of “no harm, no foul, no suit.” If she would have paid the same amount for another title insurance policy and settlement services, what harm did she suffer by the title company’s arrangement with the escrow agency?
While Edwards’ individual damages may be minimal, the case, if affirmed by the high court, could open the court doors to more claims against title insurance companies under RESPA, and could potentially impact title companies’ arrangements with escrow agencies. The parties are presently briefing the case, oral argument to follow, and with a decision likely next year. To review the Ninth Circuit opinion, click here.