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RESPA

Edwards v First American Corp, 610 F3d 514 (9th Cir, 2010), cert. dismissed, No. 10-708 (U.S. S. Ct., 2012).

Facts:Denise Edwards purchased a home in Cleveland, Ohio in 2006. A company called Tower City conducted the closing. Title insurance was purchased through First American Title, based on a referral by Tower City. Edwards paid a standard fee as regulated by Ohio law.

Edwards sued First American under the Real Estate Settlement Procedures Act (RESPA), claiming that First American and Tower City were in an illegal "Captive Title Insurance Agreement." Edwards claimed that First American paid Tower City $2 million in exchange for a 17.5% minority interest in the company and the agreement that Tower City would exclusively refer customers to First American.

First American filed a motion to dismiss Edwards' suit for lack of standing. It claimed that because Edwards was not overcharged, there was no injury, and she could not bring suit. Edwards claimed that the provisions in RESPA "give rise to a statutory cause of action whether or not an overcharge occurred." The district court denied First American's motion to dismiss and First American appealed.

Holding:Affirmed. The ninth circuit court of appeals agreed with the district court that Edwards had standing. The three requirements for a party to have standing are causation, redressability, and injury. If a statute creates a legal right, and that legal right is violated, the violation is an injury which can create standing. The court said that RESPA creates a right for a person to engage in a real estate transaction without an illegal referral arrangement. If Edwards' allegations are true, then her rights have been violated regardless of whether there was an overcharge. The fact that the exclusive arrangement existed at all could be an injury.

The court looked to both the plain language of the statute and to the legislative history of RESPA to determine whether there could be an injury without an overcharge. RESPA states that defendants who have violated the anti-kickback provision are liable to the party who was charged for the settlement service for three times the amount of "any charge paid." The court held that the plain meaning of the statute was clear. A party who paid any charge for settlement services that were involved in a RESPA violation has sustained an injury and can collect damages. The court said that this is "neither restricted to a particular type of charge, such as an overcharge, nor limited to a specific part of the settlement service." The court also noted that the word "overcharge" does not even appear in the text of the statute, which makes it more likely that the statue was meant to apply to more than just overcharges.

The court also looked at an amendment to RESPA that changed the wording of the statute to replace the phrase "thing of value" with the phrase "any charge paid." The court quoted from a House Committee Report made at the time of the amendment, discussing the reasons for the change. The report's reasoning was that the original language of RESPA did not do enough to limit "controlled business arrangements" such as the one Edwards alleged First American and Tower City to be in. The legislature was concerned that an increase in cost (an overcharge) was not the only harm that RESPA was meant to prevent. A controlled business arrangement, the Report argued, removed the impartiality of the referrer and reduced healthy competition.

For these reasons, the court held that RESPA gave Edwards a statutory cause of action and that she had standing to pursue her claims against First American.

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