Class Action Over Alleged Kickbacks Revived

     PASADENA, Calif. (CN) – A group of home buyers claiming an insurance company violated the Real Estate Settlement Procedures Act may be entitled to class certification on some of their claims, the Ninth Circuit ruled Monday.
     Lead plaintiff Denise Edwards says that First American Corporation’s transactions with multiple title agencies violate RESPA’s anti-kickback provision, claiming that the insurer paid the agencies lump sums of money in exchange for a minority interest in the agencies and the agencies’ agreement to refer future title insurance business to First American.
     Congress passed RESPA in 1974 to protect consumers from “unnecessarily high settlement charges caused by certain abusive practices.” The anti-kickback provision seeks to “eliminate kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services.”
     A federal judge denied Edwards’s motion for class certification, finding that common issues did not predominate over individual issues for the proposed nationwide class.
     The Ninth Circuit upheld the court’s ruling as to claims regarding newly formed title agencies, but it vacated the decision regarding the remaining title agencies.
     Circuit Judge Ronald Gould wrote in the panel’s 24-page opinion that since the ownership interests purchased by First American are equity shares – as opposed to goods, services or facilities – the insurer is not entitled to a “safe harbor” statutory exemption, which the district court found required Edwards to prove First American’s overpayment on an individual basis thus making a class action improper.
     Gould also said that “Edwards need only prove the existence of an exchange involving a referral agreement,” rather than inquire into individual issues of payment.
     He emphasized that at this stage in the litigation the panel made no conclusions on whether Edwards’s cited evidence resolves the merits of her RESPA claims, but that her claims present an issue that warrant class adjudication.
     “We cite First American’s alleged practices not as bearing on the merits but as bearing on First American’s common scheme – as alleged in the complaint – that predominates over individual issues for certain class members,” Gould said.
     “We vacate the district court’s denial of class certification in part as to these transactions that involved the common scheme presented to First American’s board of directors.”
     Gould also dismissed the court’s finding that third parties’ influences constituted individual issues, because “other sources of referral do not defeat the predominant question of fact, i.e. whether the title agencies have contractual obligations to refer their customers to First American.”
     “There remains a predominant, common question of whether the title agencies’ contractual obligations affirmatively influenced the home buyer’s choice of First American,” he wrote.
     But the panel refused to certify the proposed class, holding that the issue would best be resolved in Federal Court.
     Neither side immediately responded to request for comment on Monday.

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