Arbitration Ruling Throttles Real-Estate Case

     (CN) — New Jersey real-estate buyers must individually arbitrate their claims that title-settlement agents overcharged them $50 million, even though the Supreme Court changed the law governing arbitration two years after they sued, the Third Circuit ruled.
     For two years, a class of real-estate purchasers litigated their claims that they were overcharged by defendant settlement agents to the tune of $50 million classwide.
     On an individual basis, purchasers say they were charged between $70 and $350 more than the county clerk charged for recording deeds, and the defendants, most of which are title insurance companies, pocketed the difference.
     The class has spent over $50,000 on experts and served over 130 nonparty subpoenas since it filed its case in 2009, court records show.
     But in April 2011, the U.S. Supreme Court handed down its 5-4 ruling in AT&T Mobility v. Concepcion, holding that the Federal Arbitration Act preempts state laws that prohibit contracts from disallowing class-wide arbitration.
     The defendants immediately recognized “an opportunity to ward off this potential class action,” according to the Third Circuit’s 40-page opinion filed Thursday.
     A presiding federal judge agreed that Concepcion affected a significant change in the law, and ordered the parties to arbitration.
     The Third Circuit affirmed Thursday in a 2-1 decision, ruling that “the futility of raising bipolar arbitration as a defense” prior to Concepcion “should excuse the delay in doing so.”
     The title insurance companies notified the class just a month after the Supreme Court’s decision that they would seek to assert their arbitration rights, and filed a motion to compel arbitration three months after the decision came down.
     Three months “is not an unreasonable amount of time” to wait, Judge D. Brooks Smith wrote for the panel’s 2-1 majority, especially given that “no substantive or procedural litigation occurred during this delay.”
     Judge Marjorie Rendell dissented, finding that plaintiffs were undoubtedly prejudiced by litigating for two years and spending $57,000 in the process, only to be forced into arbitration.
     “The defendants did not just warm the bench for two and a half years before moving to compel arbitration,” Rendell said, arguing that the insurers’ vigorous defense indicates they waived their right to arbitration.