Edwards v. The First American Corporation, --- F.R.D. ----, 2008 WL 2461703 (C.D.Cal.).
A California court has refused to certify a class in a case claiming that an underwriter violated RESPA by buying a minority stake in a title agent at an allegedly inflated price, in exchange for a commitment to write all insurance on that underwriter's paper.
Although filed in California, this lawsuit involves title insurance sold in Ohio by Tower City Title Agency, LLC to Denise Edwards insuring the title to her Ohio home. First American Corporation bought a 17.5% interest in Tower City. Edwards alleges that First American paid an inflated price for that interest in exchange for the agreement by Tower City to be an exclusive First American agent.
The startling claim by Edwards is that this exclusivity provision was an illegal "referral" as that term is used in Section 8 of RESPA. The decision also recites that "Edwards alleges that First American purchased a minority interest in numerous title agencies at an inflated price in exchange for exclusive referrals."
Edwards sought class certification. Originally, she wanted the class to include customers "referred to" First American by "the nearly 200 title agencies partially owned by First American." The court rejected that proposed class as unworkable, but ruled that "discovery may yield evidence that a smaller class consisting of all consumers referred to FATIC by Tower City is certifiable
." It gave Edwards time to file a motion for certification of a pared-down class.
In her second motion, Edwards moved to certify a class limited to consumers who got First American policies issued by Tower City which involved "federally related" mortgage loans (the RESPA jurisdictional link) in the last two years.
The court did not certify the class. A class action must meet both prongs of Rule 23(b), that common questions of fact or law predominate over individual issues and that litigating as a class would be superior. The court found that there were two important questions of fact that would have to be decided case by case, making litigation as a class impractical: whether or not a "referral" occurred, and what damages were suffered, if any.
The court said that each person would have to prove a referral. Edwards apparently premised her lawsuit on the Gardner case from Minnesota, involving a number of affiliated business title agencies in which First American was involved. [See January, 2004 and March, 2003 issues] In defining referral, the court cited to Gardner:
To obtain damages under RESPA, a class member must have been "referred" to FATIC by Tower City.
The definition of the term "referral" introduces a significant individualized issue. A referral is "any oral or written action directed to a person which has the effect of affirmatively influencing the selection by any person of a provider of a settlement service." 24 C.F.R. § 3500.14(f)(1) (emphasis added); see Gardner v. First Am. Title Ins. Co., No. 00-2176, 2003 U.S. Dist. LEXIS 1815, at * 21 (D.Minn. Jan. 27, 2003) (defining "referral"). Consequently, class action would require proof at trial concerning each class member and whether that class member was affirmatively influenced by Tower City's actions. This proof would involve direct- and cross-examination of each class member. The court also noted that First American asserted that each potential class member "should have received a privacy policy that described the affiliation
." Based on that fact, the court said that, if this was "proven to be uniform and provide sufficient disclosure, then individualized proof of receipt (or non-receipt) becomes relevant," which also worked against class certification.
The second issue was damages. Edwards proposed that anyone who paid for title insurance would be a class member, whether or not that person was an insured. She cited Cohen v. Chicago Title Ins. Co., 242 F.R.D. 295 (E.D.Pa.2007), a refinance rate case. The court said this was a difficult proof problem:
Yet, there appears to be no simple or common basis for determining who paid and how much.
For each real estate transaction insured by FATIC for which Tower City provided settlement services, Edwards introduces documents that identify the buyer and seller of the real estate and how much title insurance cost. However, these documents do not identify who paid for that insurance. In Ohio, the buyer and seller determine who pays for title insurance based on individualized negotiations that vary in terms.
The buyer may bear the whole cost, the seller may bear the whole cost, or the buyer and seller may share the cost based on individualized negotiations. Edwards, for example, did not pay the whole premium for either the owner's or lender's policy; by negotiation, the seller paid 37.5% of the premium.
Significant individualized proof would be required merely to prove membership in the class. If this Court certified the Tower City Class, the parties would have to hale into court all of the buyers and sellers
to identify who paid for title insurance. In addition, the buyer and seller may disagree as to who paid how much, requiring the jury to make hundreds of credibility determinations.
The court thus denied class certification.
