2015 IL App (1st) 140808
Ill. App. Ct.2016Background
- Plaintiffs (Chultem and Colella) brought consolidated class actions alleging title companies (Ticor, Chicago Title, CT&T, Fidelity) made illegal kickbacks/unearned fee splits to attorney agents by paying them full portions of title premiums after sending them preliminary/pro forma title commitments (A-Exams or Preliminary Commitments).
- Plaintiffs’ theory: a pro forma commitment (per HUD/Florida Policy Statement) determines insurability and thus leaves no "core title services" for the attorney agent to perform, so payments to the attorney agents were unearned/referral kickbacks in violation of RESPA and related Illinois statutes.
- Defendants argued attorney agents performed actual, necessary, distinct settlement services (clearing liens, advising on exceptions, attending closings, etc.), so payments were for services actually performed and lawful under RESPA safe harbors.
- After this court remanded for class certification issues, the trial court held a bench trial on whether attorney agents still performed services after receipt of the commitments and found they did; it entered judgment for the title companies and denied plaintiffs’ RESPA claim and related state claims.
- The appellate majority affirmed, applying Freeman v. Quicken Loans to hold RESPA forbids payments only where no services were performed (value/reasonableness of fee is irrelevant); because attorney agents performed services, payments were lawful. Justice Pucinski dissented.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did title companies violate RESPA §2607 (kickbacks/fee-splitting) by paying attorney agents after sending pro forma commitments? | Payments were illegal kickbacks because pro forma commitments removed core title work, so attorney agents did not earn the fee. | Payments were for services actually performed (clearing liens, waiving exceptions, closing), so not kickbacks or unearned fee-splits. | Held for defendants: RESPA is breached only where no services are performed; attorney agents performed services, so no violation. |
| Does sending a preliminary/A-Exam that meets HUD’s "pro forma" definition automatically render payments unearned? | Yes — a pro forma commitment determines insurability, leaving no core title services for the attorney agent. | No — whether a document is "pro forma" does not automatically eliminate subsequent, compensable services the attorney agent performs. | Held: No automatic rule; courts must look to whether any services were actually performed; here agents did perform services. |
| Is the reasonableness or market value of the fee relevant under RESPA §2607(b)? | Plaintiffs say fee must be commensurate with services; overpayment can make a payment unlawful. | Defendants say RESPA does not regulate price reasonableness; liability requires that no services were performed. | Held: Reasonableness/value is irrelevant under Freeman; only whether any services were performed matters. |
| Was the trial court bound by the earlier class-certification opinion to treat commitments as pro forma without trial on services? | Plaintiffs: prior appellate decision limited remand to whether pro forma commitments were sent; no transaction-by-transaction review should have been permitted. | Defendants: prior ruling addressed class-certification only and did not resolve merits; trial court properly decided facts on remand. | Held: Prior opinion concerned class certification, not merits; trial court properly considered whether agents performed services. |
Key Cases Cited
- Freeman v. Quicken Loans, 566 U.S. _ (2012) (RESPA §2607(b) prohibits fee-splitting only where no services were performed; value/reasonableness not a basis for liability)
- Howland v. First American Title Ins. Co., 672 F.3d 525 (7th Cir. 2012) (HUD guidance should not be read to create a per se rule forbidding full payment where an agent does not qualify for §8(c)(1)(B); suitability of overpayment claims for class treatment)
- Galiano v. Fidelity Nat’l Title Ins. Co., 684 F.3d 309 (2d Cir. 2012) (elements required to prove a §2607(a) kickback/referral violation)
- Lane v. Residential Funding Corp., 323 F.3d 739 (9th Cir. 2003) (§2607 targets payments made solely for referral with no services rendered)
- Clements v. LSI Title Agency, Inc., 779 F.3d 1269 (11th Cir. 2015) (to state §2607(b) claim, plaintiff must allege no services were rendered in exchange for the fee)