A recent RESPA litigation ruling by the United States Sixth Circuit Court of Appeals in Cincinnati, Ohio sparked headlines this week when they overturned a district court ruling denying class certification in the Erik C. Carter, et. al., United States of America v. Welles Bowen Realty, Inc. et al lawsuit. No. 07-3965.

The issue at dispute is whether a Section 8 claim of the Real Estate Settlement Procedures Act violation gives consumers “standing even if the consumer does not allege an above-market race charge for services, i.e. an ‘overcharge.'” The district court previously held that because the defendants did not over charge the consumers they didn’t suffer an injury but the appellate court has overturned the district courts decision.

Welles-Bowen Title Agency is a joint venture affiliated business arrangement, owned by Welles-Bowen Realty, Inc. and Chicago Title Insurance Company–a Fidelity subsidiary. The alleged problem with the relationship however appears to be that Welles-Bowen Title Agency did not really perform any settlement work, review title, or even conduct the closings. However, Chicago Title gave Welles-Bowen Realty, Inc. seventy percent (70%) of the fees and title policy money generated. If the allegations are true then this relationship would appear to be an illegal sham affiliated business arrangement under federal RESPA guidelines. There are other issues at play as well, such as the State of Ohio’s affiliated business arrangement ownership and profit requirements but those were not addressed in this appellate decision.

At issue is whether this was an illegal kickback and unearned fee violation by Welles-Bowen Title Agency and if this was an illegal sham affiliated business arrangement (AfBA) then are consumers who paid this company entitled to be reimbursed by the illegally profiting parties.

The consumers according to the Plaintiffs documents did not pay higher fees but they did allegedly pay money to a sham joint venture. The key question now will be, should a sham joint venture be entitled to keep its profits or should a sham joint venture be appropriately penalized by awarding those members of the class treble damages and attorneys fees as an appropriate penalty. If the Defendants prevailed in this suit and the joint venture was indeed a total sham them the court could essentially approve of illegally structured joint ventures because those who engage in them illegally structured businesses would be immune from civil class action prosecution so long as the fees are reasonable.

The defense clearly needs to show what functions it’s client Welles-Bowen Realty performed in order to receive seventy (70%) of the premium. The ownership and business structure of Welles-Bowen Title Agency will certainly be under the microscope.

As for other RESPA class action lawsuits–this ruling strengthens numerous plaintiffs class action RESPA lawsuits across the United States because this opens the door up for plaintiffs to recover damages when corporations don’t play by the rules.

To read more about this see The Toledo Blade story and October Research’s RESPA

If you have legal questions related to this lawsuit or any other RESPA lawsuit please contact the Sterbcow Law Group LLC at 877-854-2182.

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