The Floodgates Have Opened: What the Supreme Court’s RESPA Ruling Means to You

On June 28, 2012, the United States Supreme Court dismissed the case of First American Financial Corporation, v. Denise P. Edwards, stating that review had been “improvidently granted.”

This leaves standing the Ninth Circuit Court of Appeals decision in Edwards v. The First American Corporation, in which the California court rejected First American’s argument that the plaintiff could not sue for a RESPA violation because she had not been overcharged for title insurance.

In the underlying case, the plaintiff, Edwards, sued First American, alleging that First American paid illegal kickbacks in exchange for the referral of title insurance business. The plaintiff claimed that, in connection with the purchase of her home, Tower City referred the title insurance to First American, and that this referral was illegal under RESPA.

First American moved to dismiss the class action complaint on the ground that plaintiff had not suffered any financial injury and, therefore, she had no standing to sue. The District Court agreed with plaintiff and denied the motion to dismiss.

The Ninth Circuit agreed with the District Court. The Ninth Circuit explained that RESPA does not require a showing of an overcharge. Rather, a plaintiff has a statutory cause of action under RESPA even when there is no showing of an injury separate and apart from the violation of the statute itself.

The Supreme Court’s dismissal of the First American case leaves the Ninth Circuit’s decision as the controlling law in California. A consumer may bring a claim, including on behalf of a class, for a RESPA violation even when the consumer has not been overcharged, or otherwise directly injured, as a result of the violation.

This decision will open the floodgates for aggressive class action attorneys to go after corporations that may have broken the law. This could cost the industry millions of dollars and countless hours of work time.

The bottom line is that now, even inconsequential financial gains can get you into a lot of trouble.