Denise Edwards v. the First American Corp
2015 U.S. App. LEXIS 14841
9th Cir.2015Background
- Plaintiff Denise Edwards bought a home in Ohio and, after Tower City Title Agency referred First American, used First American for title insurance. First American had purchased a 17.5% interest in Tower City in a lump‑sum transaction that also included an agreement for Tower City to refer future title business to First American.
- Edwards sued First American under RESPA § 8 (12 U.S.C. § 2607), alleging a nationwide scheme in which First American bought minority equity in title agencies in exchange for agreements to refer future title‑insurance business (i.e., unlawful kickbacks).
- District court twice denied class certification (first for a 180‑agency class, then for a narrowed 38‑agency nationwide class), finding individual issues (e.g., fair‑value overpayment, reliance/causation, agency type differences) would predominate. This Court previously reversed as to Tower City and ordered further discovery (Edwards I).
- On remand, Edwards sought certification of a nationwide class based on 38 agencies; the district court again denied certification under Rule 23(b)(3). Edwards appealed.
- The Ninth Circuit (this opinion) (1) holds that RESPA § 8(c)(2) safe harbor (payments "for goods, facilities, or services") does not apply to purchases of equity interests as a matter of law; (2) rejects the view that plaintiffs must allocate lump‑sum payments between equity and referral consideration; (3) affirms denial of certification as to newly‑formed agencies but vacates denial in part and remands with respect to preexisting agencies that fit First American’s alleged common scheme.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 2607(c)(2) safe harbor applies to lump‑sum equity purchases | Edwards: purchases of equity are not payments ‘‘for goods, facilities, or services,’’ so the safe harbor does not save the transactions | First American/CFPB: the payments should be analyzed under § 2607(c)(2); must show services/facilities actually provided and reasonable compensation | Held: § 2607(c)(2) does not apply to purchases of ownership interests as a matter of law; district court erred relying on it |
| Whether plaintiffs must prove how much of each lump sum was paid specifically for referrals (i.e., individual valuation inquiries) | Edwards: lump‑sum consideration can support multiple promises; need only prove an exchange of a thing of value for referral agreement | First American: must show per‑transaction overpayment or excess payment attributable to referral (individualized proof) | Held: plaintiff need not apportion the lump sum; RESPA § 8(a) is satisfied by alleging a thing of value was exchanged pursuant to an agreement to refer; individual valuation not required for class predominance |
| Whether third‑party influences on consumer choice (realtors, lenders, brokers) defeat predominance | Edwards: other influences do not negate the common question of whether captive agencies contractually obligated to refer to First American | First American: individual buyer influences create individualized reliance/causation issues that defeat predominance | Held: third‑party influences do not defeat predominance; referral need not be sole or primary influence under Regulation X |
| Whether differences among agency types (ABA status, majority ownership, newly‑formed agencies) require denial of class certification | First American: (1) some transactions are ABAs exempt under § 2607(c)(4); (2) majority ownership negates referral; (3) newly‑formed agencies differ factually from preexisting agencies | Edwards: these defenses are inapplicable or can be resolved commonly | Held: (1) § 2607(c)(4) inapplicable as a matter of law because First American was the referral recipient, not the referrer; (2) majority ownership does not make them the same person for § 2607 purposes; (3) district court correctly denied certification as to newly‑formed agencies because those transactions lack common factual questions with the preexisting‑agency scheme |
Key Cases Cited
- Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (agency statutory‑interpretation framework)
- Auer v. Robbins, 519 U.S. 452 (deference to agency interpretation of its own regulation)
- Wal‑Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (class commonality standard)
- Amchem Products, Inc. v. Windsor, 521 U.S. 591 (predominance and class cohesion analysis)
- Freeman v. Quicken Loans, Inc., 132 S. Ct. 2034 (RESPA context on divided charges; distinguished here)
- Schuetz v. Banc One Mortgage Corp., 292 F.3d 1004 (HUD two‑prong safe‑harbor test discussed and distinguished)
- Edwards v. The First American Corp., [citation="385 F. App'x 629"] (9th Cir.) (earlier panel decision reversing denial as to Tower City and ordering nationwide discovery)