BREAKING: 9th Circuit Court of Appeals Grants Class Certification in Edwards v. First American Corp RESPA Class Action

The United States Court of Appeals for the Ninth Circuit issued their 24 page Opinion today, August 24, 2015, in the Denise P. Edwards versus The First American Corporation; First American Title Insurance Company class action lawsuit. No. 13-55542 D.C. No. 2:07-cv-03796-SJO-FFM.

The Edwards v. First American class action lawsuit was originally filed on June 12, 2007 and has spent over 8 years bouncing from federal court to federal court.

The 9th Circuit Court of Appeals affirmed in part and vacated in part the United States District Court for the Central District of California’s order denying class certification in a case where the Plaintiffs alleged that First American Title engaged in a national scheme of paying title agencies things of value in exchange for the title agencies’ agreement to refer future title insurance business to First American in violation of the Real Estate Settlement Procedures Act “RESPA”.

The Court of Appeals Panel held that in determining the proprietary of class certification, the district court erred in holding that the RESPA Safe Harbor in 12 U.S.C. §2607(c)(2) requires Edwards to prove that First American overpaid for its ownership interests in each of the title agencies.

The Opinion written by Judge Gould explained that the ownership goods purchased by First American are equity shares–not goods, services or facilities within the meaning of RESPA §2607(c)(2). The Panel also held that the district court abused its discretion in denying class certification on the grounds that 12 U.S.C. §2697(a) requires an individual inquiry, on each transaction, to determine whether First American’s purchase prices of the ownership interests exceeded their fair market value.

The Court also held that cases involving illegal kickbacks in violation of RESPA §2607(a) are not necessarily unfit for class adjudication. The 9th Circuit Court of Appeals wrote that Edwards need only prove the existence of an exchange involving a referral agreement, which does not require inquiry into individual facts across all 38 captive title agencies, and that the proposed class members also share common questions of fact.

The Panel concluded that the alleged common scheme, if true, presents a significant aspect of First American’s transactions that warrant class adjudication: Whether First American paid a thing of value to get its agreement for exclusive referrals in violation of RESPA. The Federal Appeals Court vacated the District Court’s denial of class certification in part to these transactions that involved the common scheme presented to First American’s Board of Directors.

The Panel of Judges also disagreed with the District Court’s holding that influences by third parties constitute individual issues that render RESPA class adjudication improper. The panel wrote that other sources of referral do not defeat the predominate common questions of fact, i.e. whether the title agencies have contractual obligations to refer their customers to First American.

The Court also held that the District Court erred in determining that individual inquiries are required in connection with twelve title agencies that are affiliated business arrangements and in connection with certain agencies that are majority-owned by First American.

First American however did score one small victory when the 9th Circuit Court of Appeals agreed with the District Court that First American’s transactions with newly formed title agencies do not raise common issues sufficient for class action adjudication, and affirmed the District Court’s denial of certification as to the newly formed title agencies.