When Denise Edwards bought a house in Cleveland in 2006, California-based First American Financial Corp. provided the title insurance. Edwards later learned that First American had an exclusivity agreement with her title company, Tower City. The insurer allegedly paid millions of dollars to title companies such as Tower City in exchange for exclusive referral relationships.
Such deals violate the Real Estate Settlement Procedures Act (RESPA), a federal statute that bars kickbacks. Congress enacted RESPA in 1974 to require lenders and providers of real estate settlement services to be more transparent about homebuyers’ closing costs. The statute authorizes homebuyers to sue violators in federal court for treble damages.
Most observers expect a divided ruling from the high court. “Several justices seemed willing to say that there is some presumed harm when there’s a kickback,” says Michael Leffel, a partner at Foley & Lardner. “Five justices are concerned with a broad reading. One or two justices will say that a statutory violation is not enough.”