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First American Financial Corp. v. Edwards
What’s at stake?
Holding corporations accountable when they violate federal laws preventing payment for business referrals.
Whether the Real Estate Settlement Procedures Act of 1974 allows individual plaintiffs to recover charges for title insurance when the selling corporation has violated a provision of the Act, regardless of whether the plaintiff was overcharged.
November 28, 2011
On June 28, 2012, the Court dismissed the grant of certiorari as “improvidently granted.” Thus, the Ninth Circuit’s decision in favor of Denise Edwards stands.
What the case is about:
First American Financial is a holding corporation that owns First American Title, which provides title insurance. It also partially owns a number of other title insurance agencies that ostensibly offer a range of title insurance policies, but pursuant to an agreement with First American Financial and unknown to customers, only offer First American Title insurance. Such contracts are illegal under the Real Estate Settlement Procedures Act of 1974 (RESPA). Enacted to protect consumers from overpriced insurance due to practices like kickbacks, RESPA outlaws payment for business referrals. Anyone charged for a settlement that violates the law may collect three times the amount of the charges.
Denise Edwards bought a house and received a settlement statement requiring her to pay for title insurance from First American Title. She claims that the agency from which she had purchased title insurance used to work with multiple title insurance companies but entered a kickback agreement with First American Title in 1998. She further contends that RESPA’s damages clause allows a lawsuit by private individuals regardless of whether the individual overpaid for insurance because of the kickback.
First American claims that Ms. Edwards was not actually injured because she cannot prove that she would have paid less for title insurance from another company. In fact, Ohio, where the conflict arose, requires all title insurance companies to charge the same amount. First American also argues that RESPA allows only the settlement service, not the individual customer, to bring a lawsuit.
Even though Ohio requires all title insurance companies to charge the same amount, not all states follow this practice. If corporations like First American Financial are allowed to enter kickback agreements, home buyers in other states could be forced to pay too much for their title insurance.
If the Supreme Court sides with First American Financial, it will weaken RESPA regulations and put consumers seeking title insurance at an economic and informational disadvantage.