Supreme Court takes ‘unusual’ tack in First American v. Edwards

The U.S. Supreme Court released its opinion in First American v. Edwards today, sending a troubling but clear message not only to settlement services providers, but potentially all industries covered under consumer statutes.

In a briefly worded slip opinion that is likely to impact not only future RESPA cases but other consumer statutes as well, the U.S. Supreme Court today dismissed First American v. Edwards, saying only, “The writ of certiorari is dismissed as improvidently granted.”

“The decision of the Court is unusual to say the least,” said KL Gates attorney Phil Schulman. “In essence, the Court is saying that upon further review, after hearing oral arguments, this case may not have presented sufficient constitutional issues in a clear-cut way and they want to wait for a better or clearer case to come along. It is basically a denial of certiorari, but after, not before, oral argument.”

The court was asked to consider whether purchasers of title insurance have Article III standing to sue under RESPA for undisclosed kickbacks without asserting an actual injury.

“The Court’s decision here could affect the future of the settlement services business and enable similar statutory causes of action under other frameworks. In this situation the absence of a ‘decision’ is in fact a decision,” said McLaughlin Stern attorney Jeffrey Arouh. “Apparently the court has left in place the right of a plaintiff to bring an action without alleging actual injury to themselves.”

The dismissal means that the Ninth Circuit Court decision in the case stands. The Ninth Circuit held that RESPA’s language, by creating a cause of action, gave Edwards Article III standing to sue regardless of whether she was overcharged. Schulman said the dismissal means that the court views a statutory violation of RESPA as sufficient to grant a plaintiff standing to sue.

“They need not show economic injury or damages to get into court,” he said. “Said another way, mere violation of the RESPA statute constitutes sufficient injury to sue. This case leaves the courts split on this issue and we will have to wait for another case to come along before the Supreme Court weighs in on this standing issue. This case not only affects RESPA, but every consumer statute that provides strict liability for a statutory violation.”

First American Financial Corp. and its subsidiary, First American Title Insurance Co., issued the following statement regarding the U.S. Supreme Court’s decision: “Though we are disappointed that the United States Supreme Court reversed its initial decision to decide the issue of standing in our case, the court's action will not affect any of the remaining defenses in the Edwards case. Several defenses could either end or substantially narrow this case. We will continue to pursue our defense strategy aggressively in the trial court.” Stay tuned for further analysis of the case!