Many readers probably remember Edwards v. First American Financial Corp. for its ill-fated journey to the U.S. Supreme Court. The Supreme Court had granted certiorari to decide the issue of whether a plaintiff who brings a RESPA claim has Article III standing to recover statutory damages in the absence of any actual damages caused by the alleged RESPA violation. In 2012, seven months after oral argument, the Supreme Court issued a one-sentence per curiam order which stated only that “the writ of certiorari is dismissed as improvidently granted.” As described below, the case has since found its way back to the Ninth Circuit, which issued an opinion earlier this week in which it refused to give deference to the RESPA interpretation advanced by the CFPB in its amicus brief.
The underlying lawsuit was a class action complaint filed in 2007 by a consumer who alleged that two First American entities violated RESPA by paying unlawful kickbacks to title agencies in exchange for agreements from such agencies to refer all of their title insurance business to First American. The complaint alleged that the referral arrangements were part of agreements pursuant to which First American purchased ownership interests in such agencies to give the kickbacks “the appearance of legitimacy.” The certiorari petition followed a decision by the Ninth Circuit affirming the district court’s ruling that the plaintiff had Article III standing and its denial of class certification but remanding the case to allow the plaintiff to conduct nationwide discovery and renew her class certification motion.
After the Supreme Court’s dismissal of the certiorari petition, the case returned to the district court. The district court again denied the plaintiff’s motion to certify a nationwide class, ruling that to prove a RESPA violation, the plaintiff had to show that the defendants overpaid for their interests in the title agencies. According to the district court, such proof was necessary for the plaintiff to show that the defendants gave the title agencies a “thing of value” in exchange for the referrals as required by RESPA. In addition, because the district court read RESPA’s definition of a “referral” to require action “that has the effect of affirmatively influencing the selection” of a settlement service provider, it found that evidence on an individualized basis would be needed to show who precisely influenced class members to choose First American as their title insurer.
In its amicus brief filed in the Ninth Circuit, the CFPB argued that, when a referral agreement is entered into as part of a transaction involving the sale of ownership interests, a plaintiff can prove that the defendant paid for the referral without necessarily showing that the defendant overpaid for those ownership interests. According to the CFPB, the safe harbor that permits “payments for goods or facilities actually furnished or services actually performed” only applies when good, services or facilities are “actually provided-typically in the context of particular real estate settlements.” The CFPB therefore took the position that the safe harbor does not extend to every transfer of “things of value,” such as ownership interests in title agencies. It contended that the sale and purchase of such ownership interests can be considered “things of value” paid in exchange for referrals without regard to whether the price paid for the interests was fair. Thus, according to the CFPB, RESPA’s kickback prohibition is violated if the referral agreements between First American and the title agencies were a condition to First American’s purchase of ownership interests in the agencies.
On August 24, 2015, the Ninth Circuit issued an opinion vacating the district court’s denial of class certification except with respect to First American’s transactions with certain newly-formed agencies (i.e. agencies formed by First American with third party investors rather than agencies already existing at the time First American purchased its ownership interest). In the opinion, the Ninth Circuit agreed with the CFPB’s position that the safe harbor did not apply to First American’s ownership interests. However, the Ninth Circuit stated explicitly that it agreed with the CFPB’s interpretation not as a matter of deference (which the “CFPB urges us to give”) but because the CFPB’s interpretation was consistent with RESPA’s language. The Ninth Circuit stated:
Here, CFPB is interpreting the statute, not the regulation. An agency’s interpretation of the statute-when presented in an amicus brief-is not promulgated in the exercise of its forma rule-making authority, so no Chevron deference is warranted.
Since the beginning of the CFPB’s amicus brief program, we have voiced our concerns about the program’s lack of transparency and the CFPB’s use of the program to make law. We are glad to see that the Ninth Circuit appears to have recognized our concerns by not deferring to the CFPB’s attempt to make RESPA law through an amicus brief.