Northwest Title Agency, Inc. v. United States
2017 U.S. App. LEXIS 7526
| Fed. Cir. | 2017Background
- HUD (FHA) hires contractors to perform closings for single-family properties it acquires and resells; Northwest Title Agency (NWTA) was a contractor under three two-year contracts (2010) covering WI, MN, and MO.
- Contracts set a per-closing CLIN price and stated the unit price "shall be inclusive of all costs," listing numerous items (labor, notary, recording, title search costs, etc.).
- Contract paragraph B.4.2 stated purchasers, lenders, and sellers "shall not pay any additional costs for closing services, including an additional lender fee," except as explicitly allowed elsewhere.
- Contracts allowed buyers to retain their own closing agents, advisors, attorneys, and to purchase optional title insurance from NWTA or any firm.
- HUD permitted NWTA to charge buyers for title insurance in WI and MN and for associated searches in those states, but disallowed closing-service fees to buyers in all three states and disallowed some Missouri title-search charges.
- NWTA sued in the Court of Federal Claims seeking ~$4.24 million for lost closing-fee revenue; the Claims Court granted summary judgment for the United States finding the contracts unambiguous and prohibiting additional closing charges. NWTA appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the contracts allow NWTA to charge homebuyers separate closing fees | NWTA: contracts are ambiguous; industry practice permits separate closing agents and fees | U.S.: contracts unambiguously prohibit additional closing-service charges | Court: Contracts unambiguous; inclusive unit price and B.4.2 bar additional closing fees |
| Whether trade practice/extrinsic evidence may create ambiguity | NWTA: industry custom shows separate fees are customary and should be considered | U.S.: plain language controls; no need for extrinsic evidence | Court: May not use trade custom to create ambiguity where language is clear; extrinsic evidence excluded |
| Whether enforcing the fee prohibition violates RESPA by coercing buyers to buy title insurance from NWTA | NWTA: prohibition effectively creates a discount/coercion to buy NWTA title insurance, violating RESPA §2608 | U.S.: Contracts do not coerce; title insurance optional and buyers may choose another insurer | Court: No RESPA violation; contracts explicitly permit buyer choice for title insurance/agents |
| Whether NWTA could charge for additional title searches in Missouri | NWTA: sought fees for extra Missouri title searches | U.S.: HUD disallowed such charges; no evidence searches were necessary | Court: NWTA did not properly raise or show necessity; claim fails |
Key Cases Cited
- Castle v. United States, 301 F.3d 1328 (Fed. Cir.) (summary-judgment standard)
- TEG-Paradigm Envtl., Inc. v. United States, 465 F.3d 1329 (Fed. Cir.) (de novo review of contract interpretation)
- Metric Constructors, Inc. v. Nat’l Aeronautics & Space Admin., 169 F.3d 747 (Fed. Cir.) (contract language judged by reasonably intelligent person familiar with circumstances)
- Hol–Gar Mfg. Corp. v. United States, 351 F.2d 972 (Ct. Cl.) (contract interpretation principles)
- Coast Fed. Bank, FSB v. United States, 323 F.3d 1035 (Fed. Cir.) (plain and ordinary meaning; extrinsic evidence not allowed for unambiguous contracts)
- H.B. Mac, Inc. v. United States, 153 F.3d 1338 (Fed. Cir.) (reasonable-prudent-contractor perspective for interpretation)