Ninth Circuit Rules Against Title Insurer in Long-Running RESPA Litigation

CFPB Class Action RESPA

On August 24, the Ninth Circuit held that a title insurer’s equity investments in title agencies in exchange for agreements that the agencies would refer customers to the insurer violated the anti-kickback provisions of the Real Estate Settlement Procedures Act (RESPA). Edwards v. First Am. Corp., 2015 WL 4999329 (9th Cir. Aug. 24, 2015). In this long-running case (covered in InfoBytes here, here, here, and here), borrowers filed a putative class-action lawsuit against the title insurer claiming violations of Section 8 of RESPA, which prohibits payments for the referral of settlement service business. In prior phases of the litigation, courts declined to certify the class, and the U.S. Supreme Court eventually granted certiorari but declined to rule on the merits of the litigation. In this appeal, the plaintiff-borrowers asked the Ninth Circuit to review the district court’s most recent denial of class certification, and the CFPB filed an amicus brief in the appeal as well. The Ninth Circuit affirmed the denial of the certification, finding that common issues did not predominate over individual issues for the proposed class. The court further stated that, while RESPA exempts payments for “goods,” “facilities,” and “services” from Section 8’s prohibition on referral fees, the title insurer’s equity investments in the title agencies were not payments for “goods,” “facilities,” or “services.” Further, the court found that RESPA’s exemption from Section 8 available to affiliated business arrangements did not apply because no compensable services were performed by the title agencies in exchange for the payments and the title insurer did not receive any payments from the title agencies as a return on its ownership interests.